Monthly Archives: June 2015

Ethics in Business: How to Avoid the “Road to Ethical Damnation.”

Ethics in Business: How to Avoid the “Road to Ethical Damnation.”

Of the many periodicals I read and review, I always look forward to Business Compliance, and specifically to the Round Table discussions, where I have had the pleasure and honor of being a prior contributor. This quarter brings another compelling array of thought leaders in a discussion titled Ethics in Business, and I thank Laurenz Baltzer, Publisher, Baltzer Science Publishers, for making this quarter’s Round Table discussion available at no cost by linking here. Thus, I encourage readers to download the entire article as to enjoy the complete discourse. As a paid subscriber, I find  Business Compliance to be one of the most compelling periodicals in the compliance field, from both an academic and practical perspective. Accordingly, I will continue to focus on its work in order to expose BC to the wider compliance community. The welcome page can be found by linking here.

In this review of Ethics in Business, I focus on the contributions of Editor-In-Chief, Anthony Smith Meyer (ASM), Bryan Cave Partner, Scott Killingsworth (SK), Maynard Leigh Associates founder Andrew Leigh (AL), and compliance specialist (and panel moderator) Sharon Ward (SW). This is not to minimize or in any way discount the contributions of the other panelists, Philip Weights, and Ludo van der Heyden;  hence, the rationale for working with Mr. Baltzer to make the entire article available.

SW launches the discussion  when she asks “what ethics means in the context of business, and if it has any practical meaning in a world in search of financial performance and continuing growth.” ASM makes an important distinction as between the concept of ethics “born of fundamental values we hold as individuals” and the “process of establishing values that the people within it (the organization) can share.” SK also echoes the importance of process when he addresses “the adherence to established values, rather than in the acceptance of them.” As part of that process SK calls our attention to why “ethical leadership in organizations is needed to constantly remind people both of the company’s key values and of how employee are expected to resolve conflicts between competing values, such as legal compliance versus sales.”

Indeed, as SK continues “it’s important that the messaging via compensation and reward systems, promotions, and discipline be consistent across the board so that employees will not be confused about the standards by which their performance will be measured.” SW asks from where these messages need to originate as to best guide the organization? Is it some “invisible hand” or perhaps a better recognized authority? AL thinks that while some part of that “hand” is grounded in an individual’s sense of “what’s right and wrong,” it also is “drawn from business leaders making a judgment of what society and others, including shareholders and the law expect of them.”

AL makes a good point, and in the field of anti-bribery compliance, where front-line personnel might get ethically “clouded” as they index incentives to compliance in low integrity regions, such a visible and steady hand provides great value. SK also reflects upon the value of strong messages when he shares that “active ethical leadership within the organization is the most powerful single factor,” adding “tone at the top is not enough by itself, but without it, there is little hope.”

AL’s comment that “doing what’s right is not divisible” is extremely compelling, as you can’t think of personal ethics and organizational ethics as compartmentalized and distinct. However, returning to prior themes of how those at the front lines can often be “irrational calculators of risk” (SK), it is important to consider that when there is confusion in the field, strong organizational values can be the ultimate tipping point “back to the right side.”

Acknowledging that not everyone makes the best ethical decisions all the time (if you think otherwise, well, that’s a different problem), organizational values and ethics can be that “steady and visible” hand which demonstrates to those in the field that taking the right path, even at the cost of business, will always be valued, and never punished. Indeed, as ASM shares, ethics and values should never “be discarded or set aside due to temporary inconvenience and self-interest. If they are, then this is the road to ethical damnation.” But back to the front lines, especially for those who are tasked with helping those in low integrity regions to manage corruption risk, this is all pedaling up-hill. With continuous, steady and exhaustive effort, progress is made. Take a break, and the slide downhill to what ASM well describes as “ethical damnation” begins.

I also appreciated AL’s comment that “relying solely on codes and regulations to guide your leadership and company actions is a sure way to land it in serious trouble,” as when this occurs “your actions can be legal, technically acceptable within some set of standards, yet still wrong.” Indeed, as a compliance professional stated at a recent symposium “when my team confronts corrupt offers in the field, their answer is no, but ‘not because compliance says I can’t do it, it’s because I don’t do it.’” Indeed, when that occurs, we have reached AL’s state of compliance as beyond a set of scripted policies and procedures that might be looked at as a “work around” at the field level.

As the Round Table started to wind down ASM cautioned “not delude yourself in bias that there is any single truth.” And I think that is a great take away for compliance teams. Like my own experience, bad behavior tends to come from multiple tipping points and hence, the solutions need to address those challenges, also from multiple points, including ethics and values. I always leave the last word to SK, who leaves us with “Policies and value statements are great but sometimes, as Emerson said “what you do speaks so loudly that I can not hear what you say.””

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What Happened In Oslo Shouldn’t Stay In Oslo

What Happened In Oslo Shouldn’t Stay In Oslo

* Photo of Helge Kvamme, Selmer Law Firm and  Norwegian Minister of Trade and Industry, Monica Maeland. Photo (c) Selmer Law.

Last week I had the pleasure and honor of participating in the Oslo, 2015 Anti-Corruption Conference, at the invitation of Helge Kvamme, Partner, Investigations and Compliance, Selmer Law Firm, Norway, and a member of the Organizing Committee as well as a speaker during the Conference. It was during the Conference that I engaged, via live video feed, in an interview with Robert “Bob” Appleton, Partner, Day Pitney, who from Norway, interviewed me in a one hour session titled “Bribery from the sharp end.” During this session, Bob launched into a  discussion which started from our first intersection in 2006, when he targeted me as Chairman of the UN Procurement Task Force,  as a subject of a UN investigation on contract fraud.

Today I have the additional pleasure of presenting a “round-up” of this unique event from three different perspectives: Helge Kvamme, as one of the Organizers and speakers, Bob Appleton as a panelist as well as speaker, and Jo Sherman, CEO of EDT Software, which is a case management software platform for disputes and investigations (see www.discoveredt.com), who was an attendee. Given the importance of this Conference, which brought together anti-corruption leaders from around the globe, I hope that today I can play a part in making certain that “what happened in Oslo does not stay in Oslo.”

So Helge, as one of the organizers, lets start with you, how about introducing everyone to the Conference, so to speak: 

Richard, based on the feedback from participants, the second Oslo Anti-Corruption Conference that took place at the Felix Conference Centre was a great success. Myself, from the law firm Selmer and representing the Organizing Committee, pointed out in my opening address, that the conference this year, being a unique cooperation between ØKOKRIM (The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime), Transparency International Norway, PwC and Selmer, was focused on the Root Causes as well as Consequences of Corruption.

I also underlined that we must not be under the delusion that corruption is a victimless crime, and referenced your presentation with Bob Appleton closing Day 1, under the headline “Bribery from the Sharp End.” I finalized my opening remarks, referring to this quotation from the President of World Bank Group, Jim Yong Kim: “Corruption steals from the poor. It steals the promise of a brighter future.”

Then the Minister of Trade and Industry in Norway, Mrs Monica Mæland (pictured above), demonstrated the importance this conference has already taken in Norway, where in her key note address she thanked the organizers for the initiative and stated that the government is looking into the need for new actions not at least due to the recent cases of bribery and corruption involving state owned companies.

From the minister’s key-note Thursday morning until the final presentation Friday afternoon, an impressive total of 30 national and international speakers and panellists gave very useful insights on topics like:

  • National and international anti-corruption development and review of relevant cases both on a national and international level
  • The causes of corruption and how a corrupt culture can emerge in organisations in spite of necessary policies and guidelines
  • Presentation of OECD’s latest report “Foreign Bribery Report – “An analysis of the crime of bribery of foreign public officials” containing very interesting findings from studies of all corruption cases from OECD’s Convention on Combating Bribery of Foreign Public Officials in International Business Transaction entered into force in 1999
  • Presentation of international initiatives regarding illicit financial flows after bribery payments including those ending up in tax havens under the control of corrupt regime leaders; including the presentation of the World Bank and the UN Office of Drugs and Crime’s (UNODC) initiative The Stolen Assets Recovery Initiative (StAR) and FBIs Kleptocracy program
  • Finance Norway´s (the industry organisation for the financial industry in Norway) Situation Report and Action Plan
  • Responsible investments – how to handle Corruption Risks in global investments
  • The consequences of corruption with focus on the situations in Angola, Ukraine and Indonesia

Bob, what about you, given that you were invited as a speaker, including our own Q and A, what resonated with you from the entire event? 

Thanks Richard. One presentation which I found extremely compelling, especially in the context of my work now as a lawyer counseling corporations on FCPA risks, as well as my former life as a DOJ Prosecutor and Chief of Investigations in two major international organizations, was the featured presentations by the FBI’s International FCPA Unit who sent their squad leadership to Oslo. The FBI described their presence in Oslo as a sign of their commitment to combating foreign bribery, and as part of their effort to extend an “olive branch” to multinational companies and other national authorities to join in the fight against foreign bribery and violations of the FCPA.

Also worth mentioning was our that our live question and answer presentation received the highest acclaim from conference participants, who called it a “unique” and a very engaging session. While many of the facts we addressed about your confronting foreign bribery during your career as an International Sales VP in the Defense Sector, came out in my UN case and your subsequent US Plea Agreement, this was a valuable opportunity, and in fact quite rare, for a live audience to have the chance to hear your experience first- hand. Richard, you were also very generous in answering audience questions.  Compliance officials in attendance commented that they found your real life experiences, as well as  the ‘lessons learned’ discussion, invaluable.

Jo, what about you? Oslo is a long way from New York, why did you attend?

I attended this conference because I have, over recent months come to realize that that many of our international corporate clients, industry colleagues and partners are actually using our software not for the purpose for which it was originally designed, eDiscovery and litigation case management, but rather to manage internal investigations, many of which relate to alleged corruption or bribery.  I attended the conference with the Manager of our London office, Mark Giles, to learn more about the anti-corruption sector and it was indeed an informative and stimulating experience.  Plus, I love Oslo and the calm sophistication of Oslo provided a perfect location for this event that attracted a diverse congregation of corporate compliance and ethics executives, representatives from charitable bodies, government officials, law enforcement officers, consultants, academics and international intelligentsia.

Helge, can you share some more information about your speakers?

Speakers and panel participants were national and international experts and representatives for public and private organisations from Norway, USA, UK, Ukraine, Angola and Indonesia. As Bob mentioned, speakers from FBI International Corruption Unit gave very interesting presentations on the Kleptocracy program regarding the “Follow the Money” initiatives and presented the impressive results in the last years regarding freezing and returning of billions of USD in stolen assets, representing a considerable achievement and a dramatic increase compared to earlier periods. At least US$20 billion is stolen each year, so much more remains to be done, but recent cases shows that asset recovery can and does work, though requires tenacity and creativity.

Richard, the need to strengthen the international cooperation and commitments regarding recovery of the proceeds of corruption and denial of safe haven to corrupt officials was referred to by many of the speakers at the conference. They were pointing at the effectiveness of a civil, non-conviction based forfeiture system as well as a system of Self-Reporting of corruption cases with the possibility of leniency based on the involved company`s Anti-Corruption Compliance efforts and cooperation.

The presentations on the situations in Angola, Ukraine and Indonesia, really proved the faces of the victims of bribery and corruption and the need to fight corruption to help the poor people of the world. Neither peace, nor development and human rights can flourish in an atmosphere of corruption.

Jo: Indeed, a theme that provided an undercurrent to many of the presentations was the devastating impact corruption can have on humanitarian projects in third world communities.  As one of the presenters said “it’s distressing to hear the wealthy beneficiaries of corruption rationalize the status quo and the extreme social injustices that humanitarian projects are trying to address.”

Bob: Agreed. The Conference presentations on anti corruption efforts in Angola, Tanzania, and Ukraine, as well as information from these countries on the success of anti corruption efforts and to highlight the scourge bribery has on developing and poorer countries.

I also enjoyed, and thanks to Helge, for asking me to participate in a panel on the Anti Bribery Report from the OECD, which studied 427 made foreign bribery cases around the world from 1999 through 2013.

I provided my analysis of the report, based on my experience of more than 15 years in the field, doing these cases on the front lines, and completing more than 700 bribery and corruption investigations throughout the world. My view, as I expressed, is that the report statistics  should be viewed in context of made cases, as to opposed to the total “incidents” of bribery. However, some significant aspects of the report are worthy of consideration and consistent with my findings- including that a third of all foreign bribery cases are the result of self reporting, and that law enforcement is responsible for a mere 13% and the media and whistleblowers an even smaller fraction.   I stated that there is much to be done in the fight against bribery and corruption, and that many countries must join that fight as most international corruption is not being addressed. The reasons for this include conflicts of interest with a number of the local authorities, the involvement of government officials in those countries who are in positions of power, as well as a lack of resources, and support from the governments.

Jo: As Helge himself said “millions of people are without fresh water in Africa largely due to corruption”. On this theme, the words of Norway’s Henrik Ibsen are particularly poignant “the worst a man can do to himself is to do injustice to others”.

Bob, from your days at the DOJ, was there anything particular about the FBI presentation of interest?

Definitely Richard. In his presentation, FBI Supervisor Ren McEachern informed the audience that the FBI has dramatically increased their resources devoted to foreign bribery. McEachern referred to the increase as a clear signal of the priority the FBI now places on international corruption cases. McEachern also told the audience of the FBI is committed to greater cooperation with foreign authorities. I think these are major steps Richard, and other national authorities and investigative bodies should take note, and follow the lead. It is only with and through continuous and real international cooperation that the fight against corruption has any chance.

Helge: Richard, your own session “Bribery from the Sharp End”, became a highlight of the conference with a strong message. As you well state “you bribed foreign officials, cooperated with international law enforcement and went to prison,” and at the conference, you shared this front line experience through an engaging session with Bob, for the benefit of others who confront overseas corruption risk in the field and for compliance practitioners tasked with helping them to manage corruption risk. On your video link from New York, where you exchanged perspectives with Bob, this session really gave a unique, and for the first time in Norway, a real life and exceptional insight into the root causes of corruption.

Jo: Indeed, the interview provided compelling and somewhat confronting insight into the ease with which intelligent well-credentialed executives can gradually become “ethically numb” if they are continually focused on vigorous pursuit of sales targets and bonuses.   ‘Ethically’ numb perhaps but not ‘comfortably’ so.  Richard, you paid a heavy price for your transgressions having spent time in prison, and it was interesting to hear about your work as an educator, where you were paid 23 cents an hour to teach other inmates English. Nonetheless, yours is a lesson on the considerable personal and professional consequences of corruption.

Thank you Jo. Well, as the voice of the attendee, lets give you the final word, anything you would like to share as a take-away?

Overall the conference was confronting yet inspiring.  There is much work to do but it appears there is a growing spirit of collaboration and a new energy in the global anti-corruption community.   It will not be easy and there will be casualties but, as Ibsen says, “Never wear your best trousers when you go to fight for freedom and truth.”

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Two Sides of A Global Corruption Investigation at Anti-Corruption Oslo

Two Sides of A Global Corruption Investigation at Anti-Corruption Oslo

This is the second part of my interview with Robert (“Bob”) Appleton, which is timely given our question and answer session at the upcoming Anti-Corruption Conference, Oslo, where we will engage in an interview titled “Bribery from the Sharp End,” on June 11th, 2015, 16:00 local time. There is much about this event which is unique, including our Q & A, particularly in the context of anti-corruption conferences, as it is organized by:

  • ØKOKRIM, The Norwegian  National Authority for Investigation and Prosecution of Economic and Environmental Crime.
  •  Transparency International Norway
  • PwC
  • Advokatfirmaet Selmer (Norwegian Law firm specializing in business law issues).

This is not your typical “pay to play” anti-corruption conference. As the organizers state, it is an event “intended to strengthen cooperation between private companies, the public sector, development organizations, NGOs and other relevant actors when it comes to this very topical risk area.” Also worth noting is that conference is non-profit based.  My gratitude and appreciation to Helge Kvamme, Partner – Leader Investigations & Compliance at Law Firm Selmer DA, for inviting me to address this conference through an interview with Bob.

The  link to Antikorrupsjonskonferansen 2015 can be found here.

Bob, thank you for joining us today in part II of our interview. The next time I will see you will be on June 11th  via live video feed, at the Oslo Anti-Corruption Conference, where we will  engage in our Q and A on “Bribery at the Sharp End.” So,  for those who might not be able to attend, and who might be interested in how our paths crossed in 2006, which we will address on June 11th,  perhaps you might want to share some of that trajectory.

Sure Richard. In 2006 I was the head of a newly formed anti-corruption unit within the United Nations, the Procurement Task Force ( PTF). In early 2006, the Volcker led Iraqi Oil for Food investigation had just ended, exposing the largest bribery cases in the history of enforcement. Member States to the UN were still concerned about further lurking corruption schemes in the world body, including their agencies and departments. Accordingly, the UN Secretariat created the special PTF, a diverse investigation unit with more than 30 investigators. I joined the PTF first as the Deputy Chairman, and then was appointed Chairman, and Head, in 2007.

Cases were coming in from all over. Our mandate also included investigating companies and individuals doing business with the UN. This was a first for the Organization. While it had an “internal” oversight department, they had never looked outside the Organization at those who were contractually engaging with the UN from around the world. We were focused on corruption, and contracts that the Organization awarded. We started to investigate contracts where there were allegations that some awards had been corruptly steered to favored vendors by procurement officials inside the UN.

We were focused on one such middleman, and his firm. We had already discovered that the firm had helped steer several hundred million dollars in contracts to a preferred food services vendor, and that a UN insider had actually stolen competitive bids from a sealed office in the UN building on the East River in NY. That UN official then went a hotel next to the UN and ripped out the bid “pricing”  pages from his “partner’s” tender documents,  after he discovered that the competitors had offered lesser prices. They revised their bid by replacing the discarded pages with “new” proposed prices and resubmitted the whole package back to the UN vault. They of course, and with no surprise, won the bid and got the contract.

We discovered through our own investigation that you had allegedly conspired to procure UN contracts through similar means same middleman. I found some emails with your name on them, and then I wrote to you asking you some questions about your activities and knowledge of certain parties and processes. I think you remember the document! Also, while we were investigating, I met with the DOJ Fraud Section prosecutors and handed over  evidence in some cases where they had jurisdiction, including yours.

This was an enlightening case because it relates to  themes which continue today, in that quite often, it is the third party, or intermediary,  which becomes the center of an investigation, and which then leads to other investigations and further charges. It also demonstrates the criminal and civil liability that a corrupt third party can create, not only for the immediate company,  but for other individuals and corporations it represents and acts for on their behalf. Finally, it shows the real teeth of enforcement and investigatory cooperation,  as we shared our findings with the US Department of Justice and other national authorities. That is the sharp end you know all too well from a number of perspectives. Those areas incorporate a great part  my focus in my current practice where I help multinationals to manage corruption risk and to better understand enforcement realities.

Well, I am glad that is all in the rear view mirror, and I look forward to our deeper drill on Thursday.

Bob, the landscape as in your prior articles (referenced in last week’s blog here) is very dour, but other than “stay out” or “roll the compliance dice” what are the options? Over the long haul, as many regions are now confronting domestic corruption, is time on the side of an even playing field?

Unfortunately not yet, but the landscape is changing as there is less and less ability to hide one’s actions. Even if there is no one to call you on it, companies or individuals paying bribes are at an increased risk of being exposed. You really cannot hide behind third parties and middlemen anymore. You are a great example of that Richard. There is a bit of an analogy to drug enforcement – where, participants had to always worry the person they were dealing with was a cooperator with law enforcement. With stepped up enforcement, whistle-blower policies and increased participation from other national authorities, it is a real risk for a publicly traded company to bribe. In some parts of the world, you may think you are still pretty safe, but, there too, the DOJ has shown the commitment to pursue cases from around the world.

I was asked quite often, when I was interviewing corporate officials and their middlemen, “will I be indicted under the U.S. FCPA?” It was usually the first question. The DOJ has historically demonstrated that the jurisdiction for charging a US crime is far often achieved through many indirect and some would say tenuous, means. You don’t have to have your “feet on US soil.” Just look at FIFA and the Interpol warrants. In my time at DOJ, I managed quite often to assert jurisdiction without the defendant’s actual presence on US soil. It’s not absolute, but the DOJ track record on this issue remains strong.

Richard, if you want to operate in  low integrity markets where you are dealing directly with foreign government officials, you are really rolling the dice and taking risks. Risk will remain high because nothing has really changed in these environments from the demand side. I have seen this first hand. So, if you are going to try and compete, you need to ensure your compliance program is very tight, especially when it comes to third party agents and intermediaries. Your agreements cannot expose you to risk, and your instructions must be clear and unequivocal. Also, you need to have someone with real knowledge and ability review your systems and conduct routine reviews. You also need to supervise the agents closely, and have them describe to you in advance how they will represent you in the local jurisdiction and what they are going to do to better position you to achieve the contract.

In one of your articles you state that, “incidents of corruption continue to occur unabated, and many are largely ignored.” Given the work of the OECD, the tripling of investigatory resources at the FBI dedicated to overseas corruption, and high-profile cases such as the recent FIFA arrests, is this trajectory constant, or do you see change?

The tripling of investigatory resources will help but don’t think of it is a panacea.  As I said in my piece in response to the OECD report, the “made” cases are just scratching the surface of actual bribe and corruption activity. I believe, still, that less than 1% of the incidents of bribery and corruption are being prosecuted. Only about 3% are being investigated, and less than 10% are being reported. Those new agents who are well trained and experienced, are going to be very busy.

Last question. Bob, based on your extensive experience pursuing and focusing upon corruption on the front lines and in the field for so long in such high level international roles and senior positions, as well as helping large international organizations address the risks of corruption, you bring unusual experience and insight into this that most don’t have. How have your experiences honed your skills as far as helping companies avoid results like we see so often today, in such cases like FIFA, Hewlett-Packard, Alcoa, and even the financial institutions, BNP, Commerzbank and HSBC.

 Well, Richard,  I have been very fortunate not only to be able to see corruption at work firsthand, but also help address it in some of the world’s largest and most important international institutions and companies. I do think that in order to help a company, you need to truly understand how corruption works, how it operates within a culture, how middlemen work and succeed, and how officials in the area, region or country think and act. Every place is different. You also need to know the personalities and the important enforcement officials in these locations, and what they are focused on. Just drafting an anti- corruption policy and re-arranging reporting lines in your compliance department at headquarters is not going to save you. One needs to be proactive, and also be honest about the risks and what you are facing. There are right and wrong ways to attempt to minimize risks, and there are also more and less prudent ways to address the risks. There are also the correct and incorrect ways to respond to a corruption problem, an investigation and a whistle-blower complaint.

This precise point is borne out in the FIFA case with Nike.  The Wall Street Journal published a  piece on June 5, 2015 (link here) about how Nike’s lack of familiarity with Brazil and how the contract process works there, got them into trouble and involved in the FIFA scandal.  According to the WSJ, the fact that they were rather newcomers to the Brazil market, allowed middlemen to seep into the process, unbeknownst to them.  All companies need sound guidance when venturing into unfamiliar or unchartered territory.

Thanks again Bob. It is a pleasure to be on the “same side of the table” with you! If someone would like to contact you, how might they engage?

Thank you Richard. I can be reached at [email protected]aypitney.com, or 212-297-2404. I appreciate your efforts and interest in my views. See you on the big screen Thursday!

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Robert  Appleton: It’s FCPA Compliance or Vegas

Robert Appleton: It’s FCPA Compliance or Vegas

Today is the first of a two part interview with Robert “Bob” Appleton and is an edited version of the entire interview which will be available for download when part II is published next week.

Hi Bob, and thank you for sharing your experience and perspective with today’s readers. I remember sometime in early 2007 sitting in England when someone put a fax on my desk from the United Nations Office of Internal Oversight Services, asking a lot of questions about a UN contract, and it was signed “Robert Appleton, Deputy Chairman, Procurement Task Force.” I remember after reading it, thinking, “who the heck is Robert Appleton (PG Version).”  So, how about sharing your background leading up to and including your work on that Task Force, and we can save the particulars of your specific investigation of me, for a later discussion. However, by way of background, I ultimately pleaded guilty to the charges which in part spurred from your investigation and which were shared with the Justice Department.

RA: After law school, I clerked for a very prominent federal judge in Hartford, Connecticut- Senior U.S. District Judge T. Emmet Clarie, who was on the federal bench for 30 years.. At the end of my clerkship in 1992, Judge Clarie convinced me to go to the U.S. Attorneys Office. It didn’t take a lot of convincing. He knew my father, a prominent prosecutor in Hartford, Connecticut and thought it was the logical progression for me. I spent an incredible thirteen years there- prosecuting hundreds and hundreds of high profile cases, from racketeering to international money launderers, to terrorist financiers, to 9/11 issues, weapons and technology diversions to Iran, China and Syria, drug gang leaders, and the list goes on.

In 2005, after I had been appointed as Chief of the Bridgeport, CT branch of the U.S. Attorneys Office, I had a once in a lifetime offer from Paul Volcker (the former Federal Reserve Chairman), to join his Independent Inquiry Committee investigation into the Iraqi Oil for Food Programme bribery scandal (IIC as it was called) as his Special Counsel.  I immediately inherited the investigation of the UN Secretary General and his son (Kojo), and all of the cases involving the companies that paid bribes to Saddam Hussein, as well as leading the procurement investigation team that was investigating the Swiss banks that held the proceeds from the bribed contracts and the oil sales

Our cases launched the DOJ on a number of FCPA cases, and were some of the first major cases DOJ Fraud made in this area. I worked closely with Southern District prosecutors, whom I knew from my days at DOJ. In the end, the Commission was also able to recover more than $50 million for the Iraqi people, and supported many prosecutions in New York and elsewhere, including Italy, Switzerland, France and Australia. The Commission finally concluded its work in 2006. It was a very politically charged time in the UN, and the issues were very public. The report, while not finding that Kofi Annan participated in the scheme, identified probably the largest bribery and corruption scheme in the history of any organization or country.

So, after the scandal, the U.N. was still under a lot of pressure from Member States, particularly the United States, to keep digging for corruption. It created the Procurement Task Force, or PTF, a special anti- corruption task force comprised of experienced investigators from around the world, and I joined the PTF as its Deputy Chairman, the number 2. We had more than 300 investigations within weeks of opening operations, taking many cases from the UN’s investigations division within the Office of Internal Oversight Services. One of our jobs was to review old cases to see if they were properly handled.

We had a huge caseload. We were supposed to complete our work by the end of 2007. We had so many cases that we continued until 2009, when the Russians and the Singaporeans finally succeeded in shutting us down and killed our funding.

During our efforts, we identified a number of further fraud and corruption cases involving companies from around the world doing business with the U.N. as well as UN personnel, including Alexander Yakovlev, Sanjaya Bahel, Vladimir Kuzentsov, along with suppliers, including IHC Services, Supreme Foods, ESS and, of course, your name popped up. In some cases, including yours, information was shared with the Department of Justice. The case of Sanjaya Bahel was our most significant case. Bahel was the Chief of Procurement for the Organization, who steered more than $100 million in contracts over more than 8 years, without anyone knowing it. He went to trial and got 8 ½ years in jail.

What was your next challenge given that extensive experience?

RA: I did something I always wanted to do – move abroad and travel extensively in the developing world.  In 2010, I was appointed the Head of Investigations and the Legal Counsel for the Global Fund to Fight AIDS, Tuberculosis and Malaria, in the Office of the Inspector General, in Geneva, Switzerland. The Global Fund is the world’s largest health financier, funding more than $28 billion in health grants in more than 150 countries. It is one of the Gates Foundations cherished projects as well. The U.S. contributes close to $2 billion per year to the Organization, which is 1/3 of its funding. While I was based in Switzerland, I traveled all over the world,  frequently, especially Africa, Asia and the Middle East, managing six teams of eight or so investigators, forensic experts, accountants and auditors. 

For the next four years I pursued corruption and bribery throughout these regions, and had the unique experience of being able to investigate government ministers and officials in many countries,  first hand and face to face. Our grants went directly to the countries, and their ministries, or to Principal Recipients who ran the grant programs. The only oversight was my team and our auditors. I spent months and months on the front-line of corruption in Africa and Asia.

Thank you and that is quite a career trajectory. So, when it comes to anti-bribery enforcement and investigations, what were your biggest take aways from your DOJ, UN and Global Fund roles which you see is remaining relevant to today’s anti-bribery challenges.

RA: Having completed more than 600 corruption related investigations in my career, spanning dozens of different countries and regions, the one thing I have learned is that corruption is endemic in many parts of the world, and law enforcement and other investigators are only scratching the surface.

Also, governments in different places in the world treat corruption and bribery differently. For example, in the U.N., the Russia government took no action against its own citizens or companies. Not only that, the government actually defended their citizens and companies. The issues became very political, something we are seeing start to play out right now in the FIFA case. It is a duplicate of what I faced in the U.N. It is the politicization of corruption.

Recently, I read two of your pieces, one in the Corporate Crime Reporter (March 9, 2015), and the other where you reviewed the recent OECD Bribery Report (“Incidents of Foreign Bribery Remain Largely The Same: A Circumstance Unlikely to Change” in the White-Collar Crime Committee Newsletter Winter 2014 Edition). In the CCR, you state, “The FCPA has had an impact, but it’s not a huge impact,” then continue “and without a doubt, companies are still rolling the dice. In many cases, you either roll the dice or you give up business in these locations.’ Ok, Bob, so is it FCPA Compliance or Vegas?

RA: First, there is no question that investigations have increased and results have multiplied over the last ten years. The U.S. government is prosecuting about 20 to 25 FCPA cases per year (a marked increase from the 1990s) and we see that is on the rise, as exemplified by the expansion of the FBI’s International Corruption Unit. But for other countries the success is far less and for many, none at all. But instances of bribery and corruption are in the tens of thousands on an annual basis, globally. Quite interestingly, they have not declined, despite the stepped up enforcement. Thus, from the demand side, the temptations and opportunities remain strong.

 

Many Asian countries, for example, have not prosecuted a significant bribery or corruption case. However, based on my own investigation work, in one of my prior roles, I have seen that at least one large Asian country’s multinationals as responsible for numerous acts of corruption in Africa and Asia. My investigations  and investigators identified several of this nation’s companies engaging in substantial corruption in Niger, Cambodia, Singapore, Indonesia and elsewhere. In interviewing the officials of the company as well as their agents, they admitted the bribe activity. They were never charged, either in their home country or in any other jurisdiction.

I think companies understand that the government prosecutes a stark minority of the incidents of bribery and corruption. Also, voluntarily disclosing wrongdoing is counter-intuitive to many corporate executives. They just cannot do it – it goes against their principles. If an agent is not knocking on their door – why invite them in. However, companies should not be complacent; even though the risks of detection are low, they have risen substantially. And, as we are seeing with respect to recent enforcement, and charging the penalties are severe.

In addition, multinationals based overseas with no US presence may still be within the jurisdiction of the United States under the FCPA if just one of the small jurisdictional hooks are present. The nexus can be very slight. I have seen this many times, and in fact succeeded myself in prosecuting such cases. In one case that I pursued as a prosecutor, the only connection to the U.S. was the hosting of a computer server in a state.This was held by the Court to be sufficient to establish jurisdiction over the person, who had never previously set foot in the U.S. Your readers overseas should think carefully about the misnomer that “its not my law” when contemplating corrupt activity abroad with the belief that they are beyond the reach of the FCPA.

So, I think there is still a widely, if not dangerously held view that the risks of detection are low, based on much of what I have described, and that when conduct is discovered, it is addressed on an ad-hoc basis without looking at the systemic organizational hazards. So, based on all of the above, I think there is a combination of tick-the-box compliance for the regulators, which is not going bring any credit if there is an investigation, and a “roll the dice on business practices.” As I know first hand, the demands for bribes are not subsiding, but if corporations don’t change their business, compliance and organizational practices, there could be some expensive lessons ahead, as you well know from your experience.

You state in CCR that “companies are still reluctant to institute sound compliance programs if they haven’t yet been hit with an offense.” I realize this is such a general question, but from your practice and experience, where do you think multinationals are at in terms of the compliance continuum? Do you think it remains a case where compliance personnel get what you call “tunnel vision,” as remaining too far away from the ground where we have the crossroads of compliance and commerce? 

RA: Richard, I hate to generalize. But I would say that by and large multinationals are not there yet. There is still too much focus on ‘home office’ operations, computer software programs, reporting lines, and the fact that the commercial lines trump compliance. If it comes down to a business versus compliance decision, business is still going to win, almost every time. The Commerzbank case shows how this phenomenon can cause real problems for a company or financial institution, and how fines can begin to multiply substantially. Nothing aggravates law enforcement more than such preferences and decisions within companies.

Bob, I speak often about incentives, where the social goals of corporate anti-bribery compliance are not aligned with the “win above all else” strategies of forecasts, quotas and bonus plans. Do you think that companies embrace such an attitude of “compliance for the regulators” and “incentivize to win” at the field level, where those two might actually be in conflict in many of the regions where you have worked and referenced?

RA: Without question Richard. Business is still business, and sales still gets the most emphasis in terms of relative importance. There is an attitude that if I don’t pay, someone else will, and they will get the contract. Then, what happens to me?  There is still that tunnel vision.

Well, thank you Bob, and I look forward to drilling down more into some of these issues next week.  If someone would like to get in contact with you, what should they do?

RA: Day Pitney LLP, 7 Times Square, floor 20, New York, NY 10036
[email protected]
212-297-2404

* Photograph courtesy, Robert Appleton. Robert Appleton, Procurement Task Force Chairman, with Inga Britt Ahlenius, Under Secretary General for the Office of Internal Oversight Services, UN, April, 2008, disclosing results of Appleton’s Task Force’s corruption investigations to the UN Press Corps at a Press Conference at UN Headquarters in New York.

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